Passbook Savings Account

A very common question people have when researching their next passbook savings account is, how do they actually work? How is that you are paid for keeping your money in their bank?

To start with, these savings accounts are the most popular bank accounts in America (just in front of checking accounts).

These kinds of accounts are pretty simple to define. They are a safe place where people can put their money and earn a little bit of interest at no risk. It is not a retirement plan where you may lose or gain money, but the holder of the account is guaranteed a certain amount of money back each month. This is the interest rate of return.

So how does this work? How does the bank afford to pay you to keep your money in your account in their institution? The answer is easily broken down into three parts:

1- You open a passbook savings account at the bank of your choice. On this account, you are guaranteed a certain amount of interest paid to you.

2- The bank loans out money to other people in the form of mortgages, car loans, personal loans, etc…

The bank then charges a certain amount of interest to the receivers of this loan. They charge them a higher percent of interest than they return to you. Example, the bank gives your friend a car loan at 7% interest. Your savings account pays you 2% interest. They profits are 5%.

3- The bank pays you your interest. Now the interest rate is usually compounded on a daily or monthly schedule.

Do not underestimate the power of compounded interest on a savings account. One or two percent may seem very little in the short run, but in the long run it will add up. Even Albert Einstein once said that compound interest is one of the most powerful forces on Earth.

This is the reason why you want to be paid interest on a daily schedule and not pay interest on a daily schedule. So be sure that when you receive those car loans or house loans, get rid of those as quickly as possible. Do not have one of the most powerful forces on the planet working against you. Have it work for you!

Now when you see those pennies or dollars compiling themselves in your passbook savings account, you know where it comes from. Just sit back and enjoy the free money.

Tags: passbook savings account, passbook savings account rates, passbook savings accounts, savings account passbook, savings accounts

Encouraging children to save money is never easy and our culture of instant gratification certainly does not help. Unfortunately, our children are much more likely to get excited about spending money than saving money. With all of the marketing on TV featuring one toy or another, video games, and movies, it is impossible to shield our children from the “you need this” or “buy that” mentality. However, there are several simple ways to encourage children to save rather than spend. They just require some work on your part. But, with the right encouragement, these tactics could easily help your child in their transformation from your dependent child to a fiscally responsible, independent adult.

1. Open a Savings Account

Opening a savings account for your child can never happen to early. With the steadily increasing cost of college tuition and other costs, many parents even open children’s accounts before those children are born. However, if you have not opened one for your child yet, you should certainly do so. Encourage them to deposit as much money as they can into the account. If they have received money from relatives, suggest that they place a certain amount of that money into the account. If they have gotten money for their allowance or for mowing the neighbor’s lawn, encourage them to do the same. By the time they begin to work, saving money will be second nature to them. Make sure to share with them how much is in the account frequently as well as the interest they have accrued on their savings. This will encourage them to save all the more!

2. Match the Amount That They Deposit

Another great idea is to agree to match a certain amount of money that they save in their account with money of your own. You can match equal amounts, $1 for $1 of theirs. Or, if they are doing very well with savings and don’t need an exorbitant amount of encouragement, agree to match every $5 of theirs with $1 of your own. If they are having trouble saving, this is sure to encourage them.

3. Lead by Example & Save Your Own Money

It is common knowledge that children learn by example. Therefore, make it obvious to them that you are in the habit of saving your money as well. Take your children to the bank with you when you go to make a deposit or even keep your own piggy bank so they can see you putting money into it. A piggy bank is a particularly good idea with younger children who probably have one of their own. Also, make sure to let your children know what you are saving for. This way they will be able to connect saving money with future purchases and goals.

4. Set Goals

Every child wants a new toy or game. In order to encourage them to save, place a picture of the item that they most want where they can see it all the time. Another great idea is to place a thermometer next to the picture with the price of the item on it. Fill up the thermometer as they save money. When they reach their goal, make a big deal out of going to the store and getting the “prize” in question. This will certainly encourage them to save when they see how proud you are of their abilities.

5. Teach Them How To Spend

As important as it is to save money, some children become so focused on the saving that they forget to spend at all. One of the biggest wastes of money is small things. Too often we find ourselves spending money on useless things. Teaching our children to spend money on things we really want or need is also essential to maintaining good savings and enjoying it as well!

Tom writes about saving money for a top Australian reviews website, Money Choices. He also compiles unbiased overviews of various products and contributes to their blog.

Tags: child savings, children savings, children's bank account, saving money, saving money for kids

Retirement is the time when an individual stops working or terminates his or her employment in a certain company or institution. For those unemployed, they can leave the labor force for good and spend most of their time with families and close friends. There are many retirees now who are enjoying the rest of their lives with ease and comfort. The reason behind this is; they cared to plan for their retirement by investing in an Individual Retirement Account (IRA), which helps them earn funds for their retirement savings. Fortunately, you can find many companies that offer the best IRA. If you are planning to invest in IRA, here are some guidelines you should consider.

a. The Traditional IRA – Even if this kind of IRA has many restrictions, many people still choose it because of its wide availability. If one chooses this form of IRA, he or she will enjoy its benefits which include tax deductions, investments, and tax deferred income. It is said that these benefits came from the idea on how fund becomes tax deferred until you decided to withdraw it. In other words, one can only withdraw his or her fund at the age of 59 and a half.

b. Roth IRAs - This form of investment retirement account is said to be advantageous over traditional IRAs, because your income becomes tax free. There are many best Roth IRA providers which have unique Roth IRA rules. The best thing to do is to choose the best one for your need. In order to qualify for this IRA, your income must not less than 95,000 U.S. dollars for single or 150,000 U.S. dollars for married individual. However, you will not receive any tax deductions and can only withdraw your fund when you reach the age of 59 and a half.

c. SEP IRAs – This kind of IRA is aimed to ensure that every employees of a company can receive the intended retirement benefits they deserve. If you are working for a company, then this is suitable for you. Its rules are not complicated and are similar to those in traditional IRAs. The main advantage of investing in this form of IRA is that, you are permitted to deposit 15% of your income to your IRA, which can be an easy way of investing for your retirement.

d. SIMPLE IRAs – Most small companies choose this form of IRA because it is inexpensive compared to other forms of IRAs. In this case, small companies can ensure that their employees get the right benefits they want.

Tags: ira, IRA providers, ira rules, retirement, roth ira